Pages

Search This Blog

Friday, October 17, 2014

UK are at the heart of an investigation into Europe’s biggest money-laundering operations - President Putin family in it

Front companies in the UK are at the heart of an
investigation into one of Europe’s biggest money-laundering operations,
allegedly forming part of a conspiracy to make $20bn (£12.5bn) of dirty
money look legitimate. The funds are believed to have come from major
criminals and corrupt officials around the world wanting to make their
ill-gotten cash appear “clean”, so they can spend it without suspicion.

At least 19 UK-based front companies are under suspicion. The scandal
highlights how lax corporate rules have made this country an attractive
destination for global organised crime. The secrecy company directors
are entitled to under UK law is also hindering attempts to identify the
“Mr Bigs” behind the scam.

An investigation, has identified dozens of firms in a global web spreading from Birmingham to Belize.

The scam appears to have gone on for four years before being shut
down in May by investigators in another of its main centres – the former
Soviet republic of Moldova.Vasile Sarco, an investigating officer in Moldova, told The Independent: “This money was routed from Russia, but the companies incorporated in Britain were instrumental to transit the funds.”

He has sought help from UK organised crime police to help track down the British end of the operation.

Money laundering involves creating the impression that dirty money
has been earned through legal means. Criminals need to find ways of
coming up with official documentation that testifies to their money’s
honest origins. Often, they will take over legitimate businesses which
they can then push the money through in fake transactions, generating a
paper trail of receipts.

However, when the illicit earnings run into the tens of billions of
dollars, such small-scale schemes are impractical. Documentation for
much larger amounts of cash is needed.In the scam exposed today, the launderers created front companies in
the UK which carried out massive phoney business deals between
themselves. These front companies then sued each other in courts in
Moldova, demanding the repayment of hundreds of millions of pounds of
loans.

A judge in Moldova, a small Eastern European country whose legal
system is not considered as robust as those in Western Europe, would
rule in favour of the claimant company, which would then receive the
cash from the other front firm – with an all-important signed court
document ordering the debt to be paid.

But rather than being transferred from one legitimate British company
to another, the funds were being routed from Russia, where gangs from
around the world go to launder money from corruption, drug dealing,
prostitution and people smuggling.

Their tainted money would first be put into the UK front companies’
accounts in Moldova before being transferred to another bank in Latvia.
As Latvia is in the highly regulated European Union banking system, this
final stage adds to the dirty money’s “clean” appearance.

Investigators are trying to discover the identities of the criminals
whose cash was being laundered. However, this is proving extremely
difficult because it is virtually impossible to establish who actually
owns the UK front companies – and therefore who ultimately had access to
the laundered money.Investigators said similar laundry systems, often involving UK front
companies, were being used by organised crime syndicates and officials
as far afield as South America, Syria and Japan. Britain is regularly
used in such scams because it is easy to set up front companies here
with relatively few, if any, questions asked.

The launderers are able to get the jurisdiction for their legal cases
shifted to countries like Moldova, with weaker legal systems, by
employing citizens there as guarantors in the fake business transaction.
The phoney debts were co-guaranteed by Russian companies, who
channelled the cash.

Although the British companies were registered at ordinary-looking
office buildings in London, Edinburgh, Belfast, Glasgow and Birmingham,
their real ownership is hidden by a web of brass-plate entities and
nominee directors in secretive havens like the Seychelles, the Bahamas
and the Marshall Islands.For example, one of the companies based in Edinburgh lists its shareholders as two untraceable companies in Panama and Belize.

Another, Westburn Enterprises, claimed a debt of half-a-billion US
dollars from a Russian guarantor through the Moldovan courts. Despite
purportedly carrying out such vast transactions, it lists its registered
address as that of a small accountancy firm, Axiano, in Edinburgh,
which is not involved in any wrongdoing. Westburn states that its sole
director is Marios Papantoniou, but he is merely the boss of Axiano, and
has nothing to do with Westburn’s operations.

Axiano is one of hundreds of British firms which conduct entirely
legitimately work as formation agents, setting up companies for clients
in a way that allows them to retain their anonymity. When approached by The Independent, Mr Papantoniou explained that he could not answer questions on behalf of his client unless requested to by the police.

Under UK laws, companies can obscure the identity of their owners by
using “nominee” directors – people who lend their names to a company
without actually having anything to do with them. They can also lend
their names to shareholdings in companies to mask who owns them.

Another of the UK businesses alleged to be under investigation is the
London-registered Valemont Properties. Its director is Damian James
Calderbank, who lists his address (in Companies House filings) variously
as being in two Dubai tower blocks and an office building in London.
He, too, is thought to be a nominee director and will have been unaware
of the company’s activities.

Valemont’s “company secretary”, rather than being a person who could
be questioned about its activities, is an outfit called Hextable
Limited, based in the Bahamas. Mr Calderbank’s filings say he holds 21
UK directorships, has resigned from 333 more and been a director of 227
UK companies now dissolved. He is also a director in many more offshore
companies. Accounts for 2011 show him as a shareholder, through a
Gibraltar company, in the Moldovan bank Moldindconbank, through which
all the laundered money went. That is again likely to be a nominee
shareholding in which he had no real involvement. He did not respond to
written and emailed requests to comment.

Two of the 19 front companies give as their registered addresses
places which turn out to be branches of the PO boxes chain Mailboxes Etc
– one in Edinburgh and the other in Shepherd Market, in Mayfair,
London. (There is no suggestion of wrongdoing by Mailboxes Etc.) Three
more are registered to a room in a Birmingham office building which is
home to nearly 1,300 other companies. Documents from the Moldovan
Ministry of Justice show one of those Birmingham companies received
half-a-billion dollars in one court award. None of the companies
responded to written requests for comment.

According to the investigator Mr Sarco, judges in Moldova issued more
than 50 court orders in the scam, certifying about $20bn of debts paid.
Some of the judges have resigned; others are under investigation. One,
interviewed by the OCCRP, said he had ruled correctly on the evidence
before him, pointing out that none of his rulings had been overturned.Mr Sarco said he was close to arresting “four or five” bankers in
connection with the alleged scam. He also said the suspect companies had
made payments to legitimate British firms from accounts at the Moldovan
bank used in the laundry process. The UK bank accounts involved include
ones at UBS in London, HSBC, RBS, NatWest and Citibank. The Independent is passing details of the transactions to the banks.

Mr Sarco said: “We hope our colleagues [at Britain’s National Crime
Agency] will uncover what activity took place in the UK, but our main
difficulty is that the relevant authorities in the Russian Federation
are being less co-operative.” He said he had contacted the Serious
Organised Crime Agency (which merged into the NCA last year) with
information about the scam. The NCA declined to comment, saying it was
unaware of any investigation.

The Russian connection is crucial to the case but the companies there
who funnelled the money are proving difficult to penetrate. They appear
to have been represented by proxy people in Moldova and Ukraine who
were paid small sums to front for the real figures behind the
transactions.

One such proxy was a Moldovan citizen listed as the guarantor for a
loan made to Valemont Properties – one of the first UK firms used in the
alleged scam, back in 2010.

The man, Andrei Abramov, works at Chisinau airport in Moldova. He
said he was approached after graduating by a man offering him a job
opening a branch of his consultancy in Moldova. When tracked down by
reporters from the OCCRP, Mr Abramov claimed he was told he would be the
branch manager. “It never happened though. I worked for them for four
months and all I got was $100.”

Igor Putin - Some of the banks involved were linked to a relative of Russian President Vladimir Putin and a former Kremlin official.

The Moldovan judge ordered two Russian firms to pay a combined
$408.3m to Valemont. The money was transferred from Russia to the
Moldovan bank Moldindconbank, exchanged into pounds and transferred to
Valemont’s account at Latvia’s Trasta Komercbanka.

The same route was
used for all the alleged transfers. Moldindconbank denied breaking any
rules, saying its operations have respected Moldova’s legislation and
central bank rules. Trasta Komercbanka said in a statement that the case
was still under investigation and that neither the bank nor its
employees were involved in the alleged laundering.

Mr Sarco, heads of his country’s Money Laundering Prevention Unit,
claims the rulings from the judiciary which triggered the cash transfers
were improper and is investigating the judges, some of whom have denied
wrongdoing.

Mr Abramov was not the only Moldovan patsy. Another traced by the
OCCRP was a small-time businessman also facing a court case for meat
smuggling. A third, Evgheni Viborov, is a dispatch driver. Despite not
even being able to afford his own car, he is listed as a shareholder and
director of one of the companies which court documents show paid the
British front company Westburn Enterprises $500m.

Money laundering explained: Why criminals flock to the UK

One
of the biggest problems of being a successful drug dealer is finding a
way to make your money look like it’s been made honestly.Key to this is obtaining official documentation or receipts that show the money has been made legally.

There are many ways of doing this, from setting up legitimate
businesses that turn over lots of cash, to buying and exchanging
travellers’ cheques, to corrupting legitimate businessmen to fake
transactions to you.Another way, as this story shows, is to set up front companies and
make them look like their money comes from legitimate sources.

Britain is popular for such companies because it is so easy to set up
a company here. An industry of company formation agents and their
accompanying solicitors and accountants exist to create companies for
all-comers, with few questions asked.

An agent at London-based Dudley Miles Company Services – which set up
one of the 19 UK companies allegedly used in this scam – said he knew
nothing of the client and was under no obligation to do so. A Ukrainian
man had ordered the company over the phone, he said. Like the other
agents and accountants involved, Dudley Miles has done nothing wrong.

An Eastern European or Cypriot flavour runs through many of Britain’s
company formation agents. Most are situated in small, fairly dingy
offices in central London. Some, such as Albion Business Incorporations,
have their website all in Russian.

Another Russian formation agent who declined to give his name
explained: “Our clients like to keep their identity hidden for many
reasons. Tax avoidance perhaps. They like to come to Britain because it
is so much easier and cheaper to set up businesses here.”

Vince Cable’s Department for Business has announced plans to make
companies disclose the identities of business owners holding more than
25 per cent of the shares. The former head of the Fraud Squad, David Clarke,
now a private fraud consultant at Today Advisory, applauded the
Government’s moves, but said: “We need a proper, concerted effort
between law enforcement and Companies House, because at the moment we’re
still handing it on a silver platter to the villains.”